[Federal Register Volume 71, Number 180 (Monday, September 18, 2006)]
[Notices]
[Pages 54662-54664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7711]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-8029-N]
RIN 0938-AO19


Medicare Program; Inpatient Hospital Deductible and Hospital and 
Extended Care Services Coinsurance Amounts for Calendar Year 2007

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Notice.

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SUMMARY: This notice announces the inpatient hospital deductible and 
the hospital and extended care services coinsurance amounts for 
services furnished in calendar year (CY) 2007 under Medicare's Hospital 
Insurance program (Medicare Part A). The Medicare statute specifies the 
formulae used to determine these amounts.
    For CY 2007, the inpatient hospital deductible will be $992. The 
daily coinsurance amounts for CY 2007 will be: (a) $248 for the 61st 
through 90th day of hospitalization in a benefit period; (b) $496 for 
lifetime reserve days; and (c) $124 for the 21st through 100th day of 
extended care services in a skilled nursing facility in a benefit 
period.

DATES:  Effective Date: This notice is effective on January 1, 2007.

FOR FURTHER INFORMATION CONTACT: Clare McFarland, (410) 786-6390. For 
case-mix analysis only: Gregory J. Savord, (410) 786-1521.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 1813 of the Social Security Act (the Act) provides for an 
inpatient hospital deductible to be subtracted from the amount payable 
by Medicare for inpatient hospital services furnished to a beneficiary. 
It also provides for certain coinsurance amounts to be subtracted from 
the amounts payable by Medicare for inpatient hospital and extended 
care services. Section 1813(b)(2) of the Act requires us to determine 
and publish, between September 1 and September 15 of each year, the 
amount of the inpatient hospital deductible and the hospital and 
extended care services coinsurance amounts applicable for services 
furnished in the following calendar year.

[[Page 54663]]

II. Computing the Inpatient Hospital Deductible for CY 2007

    Section 1813(b) of the Act prescribes the method for computing the 
amount of the inpatient hospital deductible. The inpatient hospital 
deductible is an amount equal to the inpatient hospital deductible for 
the preceding calendar year, changed by our best estimate of the 
payment-weighted average of the applicable percentage increases (as 
defined in section 1886(b)(3)(B) of the Act) used for updating the 
payment rates to hospitals for discharges in the fiscal year (FY) that 
begins on October 1 of the same preceding calendar year, and adjusted 
to reflect real case-mix. The adjustment to reflect real case-mix is 
determined on the basis of the most recent case-mix data available. The 
amount determined under this formula is rounded to the nearest multiple 
of $4 (or, if midway between two multiples of $4, to the next higher 
multiple of $4).
    Under section 1886(b)(3)(B)(i) of the Act, the percentage increase 
used to update the payment rates for FY 2007 for inpatient hospitals 
paid under the prospective payment system is the market basket 
percentage increase. Under section 1886(b)(3)(B)(viii) of the Act, 
hospitals will receive the full market basket update only if they 
submit quality data as specified by the Secretary. Those hospitals that 
do not submit data will receive an update of market basket minus 2.0 
percentage points. We are estimating that after including the impact of 
those hospitals receiving the lower update in the payment-weighted 
average update, the calculated deductible will remain the same.
    Under section 1886(b)(3)(B)(ii) of the Act, the percentage increase 
used to update the payment rates for FY 2007 for hospitals excluded 
from the prospective payment system is the market basket percentage 
increase, defined according to section 1886(b)(3)(B)(iii) of the Act.
    The market basket percentage increase for 2007 is 3.4 percent, as 
announced in the final rule published in the Federal Register entitled 
``Medicare Program; Changes to the Hospital Inpatient Prospective 
Payment Systems and Fiscal Year 2007 Rates'' (71 FR 47870). Therefore, 
the percentage increase for hospitals paid under the prospective 
payment system is 3.4 percent. The average payment percentage increase 
for hospitals excluded from the prospective payment system is 3.4 
percent. Weighting these percentages in accordance with payment volume, 
our best estimate of the payment-weighted average of the increases in 
the payment rates for FY 2007 is 3.4 percent.
    To develop the adjustment for real case-mix, we first calculated 
for each hospital an average case-mix that reflects the relative 
costliness of that hospital's mix of cases compared to those of other 
hospitals. We then computed the change in average case-mix for 
hospitals paid under the Medicare prospective payment system in FY 2006 
compared to FY 2005. (We excluded from this calculation hospitals 
excluded from the prospective payment system because their payments are 
based on reasonable costs.) We used Medicare bills from prospective 
payment hospitals that we received as of July 2006. These bills 
represent a total of about 9.1 million Medicare discharges for FY 2006 
and provide the most recent case-mix data available at this time. Based 
on these bills, the change in average case-mix in FY 2006 is 0.68 
percent. Based on past experience, we expect the overall case-mix 
change to be 0.8 percent as the year progresses and more FY 2006 data 
become available.
    Section 1813 of the Act requires that the inpatient hospital 
deductible be adjusted only by that portion of the case-mix change that 
is determined to be real. We estimate that the change in real case-mix 
for FY 2006 is 0.8 percent.
    Thus, the estimate of the payment-weighted average of the 
applicable percentage increases used for updating the payment rates is 
3.4 percent, and the real case-mix adjustment factor for the deductible 
is 0.8 percent. Therefore, under the statutory formula, the inpatient 
hospital deductible for services furnished in CY 2007 is $992. This 
deductible amount is determined by multiplying $952 (the inpatient 
hospital deductible for CY 2006) by the payment-weighted average 
increase in the payment rates of 1.034 multiplied by the increase in 
real case-mix of 1.008, which equals $992.24 and is rounded to $992.

III. Computing the Inpatient Hospital and Extended Care Services 
Coinsurance Amounts for 2007

    The coinsurance amounts provided for in section 1813 of the Act are 
defined as fixed percentages of the inpatient hospital deductible for 
services furnished in the same calendar year. Thus, the increase in the 
deductible generates increases in the coinsurance amounts. For 
inpatient hospital and extended care services furnished in CY 2007, in 
accordance with the fixed percentages defined in the law, the daily 
coinsurance for the 61st through 90th day of hospitalization in a 
benefit period will be $248 (one-fourth of the inpatient hospital 
deductible); the daily coinsurance for lifetime reserve days will be 
$496 (one-half of the inpatient hospital deductible); and the daily 
coinsurance for the 21st through 100th day of extended care services in 
a skilled nursing facility in a benefit period will be $124 (one-eighth 
of the inpatient hospital deductible).

IV. Cost to Medicare Beneficiaries

    Table 1 summarizes the deductible and coinsurance amounts for CYs 
2006 and 2007, as well as the number of each that is estimated to be 
paid.

              Table 1.--Part A Deductible and Coinsurance Amounts for Calendar Years 2006 and 2007
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                                                               Value                 Number paid (in millions)
              Type of cost sharing               ---------------------------------------------------------------
                                                       2006            2007            2006            2007
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Inpatient hospital deductible...................             952             992            8.91            8.85
Daily coinsurance for 61st-90th Day.............             238             248            2.31            2.30
Daily coinsurance for lifetime reserve days.....             476             496            1.08            1.08
SNF coinsurance.................................             119             124           37.08           38.03
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    The estimated total increase in costs to beneficiaries is about 
$640 million (rounded to the nearest $10 million), due to: (1) The 
increase in the deductible and coinsurance amounts and (2) the change 
in the number of deductibles and daily coinsurance amounts paid.

V. Waiver of Proposed Notice and Comment Period

    The Medicare statute, as discussed previously, requires publication 
of the

[[Page 54664]]

Medicare Part A inpatient hospital deductible and the hospital and 
extended care services coinsurance amounts for services for each 
calendar year. The amounts are determined according to the statute. As 
has been our custom, we use general notices, rather than notice and 
comment rulemaking procedures, to make the announcements. In doing so, 
we acknowledge that, under the Administrative Procedure Act (APA), 
interpretive rules, general statements of policy, and rules of agency 
organization, procedure, or practice are excepted from the requirements 
of notice and comment rulemaking.
    We considered publishing a proposed notice to provide a period for 
public comment. However, we may waive that procedure if we find good 
cause that prior notice and comment are impracticable, unnecessary, or 
contrary to the public interest. We find that the procedure for notice 
and comment is unnecessary because the formulae used to calculate the 
inpatient hospital deductible and hospital and extended care services 
coinsurance amounts are statutorily directed, and we can exercise no 
discretion in following those formulae. Moreover, the statute 
establishes the time period for which the deductible and coinsurance 
amounts will apply and delaying publication would be contrary to the 
public interest. Therefore, we find good cause to waive publication of 
a proposed notice and solicitation of public comments.

VI. Regulatory Impact Statement

    We have examined the impacts of this notice as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-
354), section 1102(b) of the Act, the Unfunded Mandates Reform Act of 
1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). As stated in Section IV of 
this notice, we estimate that the total increase in costs to 
beneficiaries associated with this notice is about $640 million due to: 
(1) The increase in the deductible and coinsurance amounts and (2) the 
change in the number of deductibles and daily coinsurance amounts paid. 
Therefore, this notice is a major rule as defined in Title 5, United 
States Code, section 804(2), and is an economically significant rule 
under Executive Order 12866.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. 
Most hospitals and most other providers and suppliers are small 
entities, either by nonprofit status or by having revenues of $6 
million to $29 million in any 1 year. Individuals and States are not 
included in the definition of a small entity. We have determined that 
this notice will not have a significant economic impact on a 
substantial number of small entities. Therefore we are not preparing an 
analysis for the RFA.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. We have determined that 
this notice will not have a significant effect on the operations of a 
substantial number of small rural hospitals. Therefore, we are not 
preparing an analysis for section 1102(b) of the Act.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditures in any 1 year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $120 million. This notice has no consequential 
effect on State, local, or tribal governments or on the private sector. 
However, States are required to pay premiums for dually-eligible 
beneficiaries.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This notice has no consequential effect on State or local 
governments.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

    Authority: Sections 1813(b)(2) of the Social Security Act (42 
U.S.C. 1395e-2(b)(2)).

(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance)

    Dated: September 11, 2006.
Mark B. McClellan,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: September 12, 2006.
Michael O. Leavitt,
Secretary.
[FR Doc. 06-7711 Filed 9-12-06; 4:00 pm]
BILLING CODE 4120-01-P